Inflation, supply chain disruptions, labor shortages hammer restaurants even as COVID declines
In early July, the Boulder Big Red F restaurant group opened a fifth location for its popular fried chicken restaurant, The Post Chicken and Beer, in Estes Park. The plan was for the Estes Park restaurant, like The Post’s other four locations in Boulder, Longmont, Lafayette and Denver, to be open seven days a week.
The problem was to find people to work there. Due to a staff shortage, The Post had to do a soft launch for its location in Estes Park, closed on Tuesdays and Wednesdays and operating with limited hours on opening days.
“We’re only open five days a week because we just don’t have the staff to open a restaurant right now,” said Dave Query, CEO of Big Red F. Big Red F also operates Jax Fish House and Oyster Bar, Lola Coastal Mexicain, West End Tavern and Centro Mexican Kitchen.
It shouldn’t be that way. Restaurants that managed to survive a year of government-imposed closures and restrictions were supposed to be able to thrive after the COVID-19 pandemic, ready to accommodate the impatient masses of patrons who desperately wanted to get back to their old lives.
But although customers have come, few issues related to the pandemic show signs of being resolved. The inflation of good prices is eating away at their results. That is, when restaurants can get these products. Wage inflation does even more damage. Most importantly, a labor shortage forces restaurants to operate with minimal staff at a time when customers are walking through their doors. For restaurateurs in the Boulder area, it is increasingly clear that they may never reach their pre-pandemic balance again.
All these factors encourage restaurateurs to consider opening Pandora’s Box: increasing menu prices and passing this inflation on to the consumer.
“When do we get back to a certain level of business normalcy? Question said. “I don’t think there is a new normal anymore. It’s crazy.
The rise in the price of goods has been dramatic. According to the US Department of Agriculture’s 2021 Food Price Outlook, the average price of all food rose 2.2% from May 2020 to May 2021. USDA predicts this will only get worse for the rest. of the year. Here are its planned price increases for the remainder of 2021 for the wholesale food items that restaurants depend on:
- Flour: 9% -12%.
- Fruits and vegetables: 10 to 13%.
- Beef: 10% -13%.
- Pork: 14% -17%.
- Poultry: 15% -18%.
- Fats and oils: 31% to 34%.
- Wheat: 35% -38%.
- Soybeans: 58% to 61%.
“Everything is more expensive,” Query said. “Everyone has a hard time running their business. “
While commodity price inflation has become a problem for restaurants in the Boulder area, those who run the restaurants see this inflation as a symptom of the real problem, rather than the problem itself.
And this problem is work. In particular, the shortage of it. Boulder-area restaurateurs have said the lack of workers in their restaurants is the biggest issue they are facing right now. They even struggle to get people to interview for vacancies. Often those who apply are inexperienced and underqualified.
“I’ve never experienced the struggles I have now when it comes to staffing,” said Alec Schuler, founder of breakfast restaurant Tangerine, which has branches in Boulder and Lafayette, as well as a newly opened restaurant. in Longmont. “People don’t apply, or if they apply, they’re full recruits. “
Says Query: “There is no one there, and the people over there are emptied because they work too much. At this point, there is no one we are not looking for. In the old days, you would never hire someone without experience.
No one really knows why this labor shortage is so intense and has lasted so long.
“We’ve never been through this before, so it’s hard to say ‘This is the only problem,’” said Mary Ann Mahoney, CEO of the Boulder Convention and Visitors Bureau.
Mahoney said the office is taking a holistic approach to attempting to address this problem, working with associations such as the Colorado Lodging Association, Colorado Restaurant Association, Workforce Boulder County and the office’s partner restaurants to find solutions to improve the recruitment and retention of employees. A task force is expected to come up with a plan by next month, Mahoney said.
But the labor shortage isn’t just affecting restaurants. Schuler said he has a friend who owns a landscaping business who has similar challenges hiring and retaining employees. Query said the same thing about a friend who runs a doctor’s office. Beyond these anecdotal examples, the labor shortage is hitting every industry, and restaurateurs in Boulder believe it’s at least partly to blame for the supply chain issues they face.
Query said the supply chain problems faced by Big Red F restaurants are not due to a shortage of goods, but a shortage of people to process and transport those goods. For example, he said, Big Red F’s seafood supplier and chicken wing supplier told him their prices were going up because they just didn’t have the workers to process them. .
“Inflation is partly due to the labor shortage,” Query said. “There is no one to do the work. There is no one to move the goods. When do we stop attributing this to the pandemic? “
At Tangerine, Schuler said these supply issues are relatively minor, but still annoying and expensive. One week, he said, he couldn’t get capers from any supplier, so he had to buy them at the grocery store, where they are sold in small jars at a huge price compared to that. that he normally paid in bulk. Gluten-free muffins were nearly impossible to obtain for a while as government restrictions eased. At one point, Tangerine’s supply of corned beef dried up completely and when it became available again it was 25% more expensive, Schuler said.
“These are just tiny anomalies that cost us more money,” he said.
And while these staff shortages and supply chain issues were less acute, wage inflation and the restaurant industry’s wage structure put restaurateurs between a rock and a hard place, adding additional pressure. on costs and forcing them to make decisions which, no matter what, could have a negative impact on some staff.
Schuler said Colorado voters’ passage in 2016 of Amendment 70, which raised the state’s minimum wage, had a major impact on Tangerine’s finances. Amendment 70 also provided for an increase in the minimum wage with tips, which rose from $ 6.28 an hour in 2017 to $ 9.30 an hour in 2021, an increase of almost 50% in just three years.
Schuler said it costs Tangerine about $ 24,000 more per year per restaurant. It has also created a dynamic where dining room staff, who due to labor shortages are less experienced than in the past, now earn much more money than seasoned kitchen professionals.
“COVID was just another hurdle, but it was bigger, I think,” Schuler said. “When he passed [in 2016], It scared me. “
Schuler said restaurant owners across the country are experimenting with new pricing models, such as automatic tips added to the bill and no-tip restaurants. He considered moving to a model where tips are pooled and shared between reception and kitchen staff, but that would first require a further increase in the minimum wage for room workers, which would be even more damaging to the buttocks. from Tangerine line. And that would mean that hosts and servers would have to take a pay cut by receiving fewer tips.
At Big Red F, Query saw this dynamic unfold firsthand. The group’s restaurants have opted for a tip-pooling model to be shared between reception and kitchen staff.
“(This tip money) is coming from somewhere, and it’s coming from the room,” Query said. “It’s delicate.”
Indeed, Query said many hosts and servers at Big Red F restaurants were happy that kitchen workers were paid more, even if it meant a cut in pay. But he said some also quit when the change happened.
And all of this leads restaurateurs to consider something they never want to do: raise menu prices. At Tangerine, Schuler said he added a 4% cooking supplement to all bills at the end of May, money which is then distributed to kitchen staff based on the number of hours worked. Schuler said he felt he had to do it just to give these workers some form of extra compensation. He is also planning to completely increase menu prices.
“We have to increase the prices,” he said. “Actually, I haven’t done it yet, but I’m about to do it.”
This idea is disturbing.
“We were already in the highest prices for breakfast places in the Boulder area,” said Schuler. “Now we really will be. I’m worried about the restaurants at the counter. They probably won’t have to inflate menu prices that much, and that’s where I can lose market share to them.
At Big Red F, Query said he was doing everything possible not to have to raise prices at restaurants run by the group. He said Big Red F is trying as much as possible to keep costs down in other areas, such as being open for fewer hours, so that price increases remain a last resort. But he recognized that it could happen anyway.
“I do not know [how much we can cost-cut] before you have to start raising prices, ”he said. “The rise in prices is a point of no return. You don’t raise them to lower them later. Menu prices do not fluctuate, they increase. Raising prices is really, really tricky.
And for the average restaurant customer, returning for the first time to their favorite places after a year of lockdown, all they see are the higher prices and shortages of the produce they want to eat, not labor shortages, supply chain problems, declining results. They just want to eat the same food that they have always eaten, pay the same price, and have it arrive in the same amount of time.
“Ninety-eight percent of the public has no idea what’s going on,” Schuler said. “I just hope that my customers and all of the restaurant’s customers will be understanding. We’re just trying to survive.